Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWSC 66 (16 February 2010)

Last Updated: 17 February 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWSC 66


JURISDICTION:


FILE NUMBER(S):
2005/269559

HEARING DATE(S):
18 December 2009

JUDGMENT DATE:
16 February 2010

PARTIES:
Warragamba Winery Pty Ltd (Plaintiff)
State of New South Wales (First Defendant)
Sydney Catchment Authority (Second Defendant)

JUDGMENT OF:
Harrison J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
D Nock SC with K Odgers (Plaintiffs)
L King SC with N Newton (First Defendant)
C Simon (Second Defendant)

SOLICITORS:
McLachlan Chilton (Plaintiffs)
General Insurance Law Department (First Defendant)
Wotton & Kearney (Second Defendant)


CATCHWORDS:
PRACTICE & PROCEDURE – UCPR 28.2 - application to set aside previous order that issues of liability and quantum be determined separately – where high probability that plaintiffs' witnesses will give evidence touching both areas - whether questions of credit likely to arise – where real possibility of both conflicting decisions on credit of witnesses and forensic disadvantage to the defendants if separated issues not consolidated – order revoked.

LEGISLATION CITED:
Civil Procedure Act 2005

CATEGORY:
Procedural and other rulings

CASES CITED:
ABB v Freight Rail [1999] NSWSC 1037
Andrews v State of New South Wales [2008] NSWSC 1034
Hoban v New South Wales Land & Housing Corporation [2008] NSWSC 1121
Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215
Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2006] NSWSC 1464
McKenzie v Downing [2008] NSWSC 69
Perre v Apand [1999] HCA 36; (1999) 198 CLR 180
Pioneer Park Pty Ltd (in liquidation) v ANZ Banking Group Ltd [2005] NSWSC 832
State of New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511
Street v Luna Park Sydney Pty Ltd [2007] NSWSC 697
Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130
Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1

TEXTS CITED:


DECISION:
1. Revoke order 9 made by me on 1 October 2008.
2. Order that the first defendant complete service of its evidence by 31 March 2010.
3. Order that the costs of this application will be costs in the cause.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

HARRISON J

16 February 2010

2005/269559 Warragamba Winery Pty Ltd v State of New South Wales and Sydney Catchment Authority

JUDGMENT

1 HIS HONOUR: The first defendant seeks orders including the revocation of an order that I made on 1 October 2008 providing for a separation of the issues of quantum and liability: see Andrews v State of New South Wales [2008] NSWSC 1034. These orders were sought by notice of motion filed in a timely way thereafter on 14 October 2008. They were in the following terms:

1. The plaintiffs serve their evidence as to causation in the evidence which in due course they are directed to serve on liability. (For avoidance of doubt, the evidence as to causation is to include copies of the documents which they propose to tender and both lay and expert evidence regarding the extent to which any breaches of duty by the defendants caused a plaintiff loss or damage, but not that regarding the dollar value of the plaintiffs' loss or damage).

2. Paragraphs 3 to 6 of this notice of motion be stood over until the plaintiffs serve the evidence to which paragraph 1 refers.

3. Pursuant to rule 36.16 of the Uniform Civil Procedure Rules 2005, further or in the alternative, UCPR 36.17, further or in the alternative, the Court's inherent jurisdiction: order 9 made by his Honour Justice Harrison on 1 October 2008 be set aside.

4. In the alternative to prayer 3 . . . order 9 is varied such that pursuant to UCPR 28.2 the dollar value of the plaintiffs' damages is to be determined separately from and after the determination of all other questions in the proceedings.

2 In my reasons for judgment on 1 October 2008 I had dealt with the original competing contentions of the parties as follows:

"[9] The plaintiffs' arguments for a separate hearing on liability are essentially as follows. The plaintiffs contend that if the trial is to be conducted on all issues that taking into account the calling of lay and expert witnesses and the cross-examination of such witnesses, the estimated length of the plaintiffs' cases will be 131 hearing days. Some modification to the estimate must necessarily be made having regard to the settlements that have occurred since that estimate was made. In making that assessment the plaintiffs are said not to have taken into account any time for legal argument over the admissibility of documents, possible challenges to the expertise of witnesses or any other interlocutory arguments that might arise.

[10] With respect to the issue of quantum, the plaintiffs' claims cover a wide range of losses and will require a number of expert valuers in various fields. On the question of liability the plaintiffs' cases will consist of manifold documents, two expert witnesses and possibly some lay evidence. The plaintiffs anticipate that their cases will seek to rely on more than 200 documents produced by the defendants. To that extent at least the plaintiffs' claims on the question of liability would appear to be somewhat more confined. According to Mr Torrisi, the expert evidence on the question of liability does not overlap at all with the expert evidence in relation to the question of quantum.

[11] Mr Torrisi has also given evidence about the relative costs of conducting the proceedings limited to liability on the one hand compared to a joint hearing on all issues on the other hand. It is hardly controversial that the latter is likely to occupy more time both in court and out of court, including significant preparation, and that a hearing on the question of liability only will be both shorter and cheaper. According to the plaintiffs' estimate, the plaintiffs' cases at a trial limited to the question of liability might be reduced to a period of less than half the plaintiffs' estimate for the trial of all issues.

[12] The defendants oppose separate hearings, principally upon the basis that settlement of some of the cases so far has been facilitated by uncertainty about the question of liability. The defendants argue that a decision on liability that turned out to be unfavourable to them would have the potential significantly to reduce the likelihood of further settlements.

[13] Secondly, the defendants oppose a separate hearing on the question of quantum if the liability questions identified in schedule "B", or some similar identification of limited liability issues, is to be proposed in distinction to a separate hearing on all questions of liability generally. In other words, the defendants' concern is that any attempt to separate or to distil specific liability issues at this stage is both premature and suffers from the potential danger that significant liability issues may be inadvertently overlooked and thereby excluded from the list. If that were to occur, any benefits or other advantages flowing from a separation of the issues would potentially, if not actually, be lost.

[14] It seems to me that this is one of the rare cases where a separation of the issues of quantum and liability could produce significant cost savings and corresponding time advantages. I am not satisfied that an order in terms of prayer 2 in the notice of motion should be made. I consider that an order in terms of prayer 3 in the notice of motion is more likely to give effect to the efficiencies contemplated by a separation of the issues without the danger of running foul of unforeseen circumstances."

3 The first defendant's application to revisit that issue is based primarily upon the proposition that there will in fact be no procedural or related cost advantages flowing from the order that I made but that on the contrary there will instead be a considerable duplication of witnesses with associated problems. This is said to be because the very nature of the issues in dispute means that witnesses who will have to be called by the plaintiffs on liability will in due course be the same witnesses who will have to be called to establish the plaintiffs' losses. The first defendant submits that significant issues of credit are likely to arise and, in circumstances that have often been referred to in cases on the topic, that likelihood ought ultimately to inform any decision about what should occur.

4 The first defendant drew attention to the well-known authorities in the area, including the judgment of Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215 at [7] and in particular the following:

"(5) Conversely, the separate determination of an issue will rarely be an appropriate procedure where:

(a) there are intertwined issues of fact or law between the separated question and the other questions such that the determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation: Law Society of NSW v Bruce (unreported, Supreme Court of NSW, 23 April 1996, per Rolfe J), Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J).

(b) where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witness, thus possibly precluding that same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 441: Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of NSW 15 November 1994, per Rolfe J), Century Medical v THLD [2000] NSWSC 5; (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J).

(c) there is a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from that decision in relation to that separate issue, creating a multiplicity of proceedings, interruption to the court and undesirable fragmentation of the proceedings: Story of Sydney Pty Ltd v Ling (supra), Century Medical v THLD (supra)'."

5 In Perre v Apand [1999] HCA 36; (1999) 198 CLR 180 at [436], Callinan J drew attention to the difficulties that can be caused when separate trials are ordered:

"[436] Care does need to be taken in deciding whether to conduct separate trials of different issues. It sometimes happens that they may turn out to be productive of the disadvantages of delay, extra expense, appeals and uncertainty of outcome which they are intended to avoid. In tort cases in which damage is the gist of the action, it will generally be undesirable to accede to requests for them, or to order them, unless all parties accept that compensable damage has been sustained by the plaintiffs or applicants as the case may be."

6 In Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1, Kirby and Callinan JJ reiterated these concerns at [168] as follows:

"[168] The appeal should be allowed. However, we should not leave this case without making four comments. Both Mason P and Fitzgerald JA were critical of the course of limiting the issues to be tried that the primary judge adopted. In Perre v Apand Pty Ltd attention was drawn to difficulties that can be caused when that course is adopted. In light of the experience in this case, what was there said should be restated with emphasis. The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap."

7 The same theme appears in State of New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511. Gummow and Hayne JJ said at [187] that:

"At the root of all of the difficulties presented by this case lies the decision to attempt to sever trial of issues of liability from trial of issues about damages. Adopting that course in this case has led to procedural confusion. The trial at first instance miscarried. There must be a new trial with all its attendant cost and inconvenience to all those concerned."

8 Kirby J was equally critical of the decision to separate the issues at [334]:

"[334] In the appeal concerning Mr Lepore's case, the conduct of the trial, the separation of the issues, the findings by Downs DCJ and his Honour's reasons are so unsatisfactory for the resolution of the issues joined between the parties that the only just solution is a fresh trial." (emphasis added)

9 Callinan J referred to the decision at [352] in these terms:

"[352] ... the exercise of fact finding of the trial judge may have left something to be desired in part no doubt because of his adoption of a course which is to be discouraged of 'splitting the trial'..."

10 In the light of these authorities the first defendant made the following written submissions:

"10. If the dollar value of real and personal property destroyed or damaged is to be determined at a later hearing after liability, causation and damage (other than dollar value) are first determined, it would be necessary for the judge in the first hearing, if he [or she] found for any individual plaintiff, to specify which property (both real and personal) and to what extent, causation ran to. That would involve the judge in the first hearing making findings, which included a description of the physical characteristics and location of the property (both real and personal), the nature and extent of destruction or damage of property and what remains to be done to restore or replace [it]. Only then would valuers and the judge at the next hearing have the best chance of marrying up causation and damages."

11 Given these concerns, the plaintiffs would be required to give evidence in both hearings.

12 In Pioneer Park Pty Ltd (in liquidation) v ANZ Banking Group Ltd [2005] NSWSC 832, Einstein J rejected an application for separation of the questions of liability and quantum. His Honour said at [7] that:

"[7] Having closely examined the respective submissions on the Pioneer Parties applications for separate determination I have come to the clear conclusion that in these sets of proceedings the proper and principled exercise of the relevant discretion is to reject the application for a Part 28 separate order regime. By far and away the most significant factor justifying the propriety of taking this approach is the fact that the evidence of Mr Carpenter is likely to be critical both as to liability and as to damages/quantum in a number of ways. For the same reason the application for initial determination (outside of a Part 28 regime) of issues on liability is rejected. A Judge may in such a scenario be faced with having accepted the credit of witness A on tranche 1, yet be forced on tranche 2 to hold that the witness was unreliable, casting grave doubt on the liability finding. The hearing would abort."

13 The first defendant submitted further that where findings as to the credit of witnesses may be involved in the consideration of the evidence relevant to one of the proposed hearings, it is inappropriate to order a separate trial. In ABB v Freight Rail [1999] NSWSC 1037 at [15] – [16] and [19], Rolfe J said:

"[15] ... In my view, it would require an exceptional case for the Court to order a separate hearing of liability and damages when any witness is likely to give evidence on both issues. The reasons are obvious. A case should be conducted on the basis that the witness is cross-examined on all issues at the same time and in the context of all issues, because his or her evidence on one issue may impact on the acceptability of his or her evidence on the other. If there is not adherence to this practice difficult questions arise for the Court as to the extent to which cross-examination on the matter not being litigated should be allowed, and for the cross-examiner as to how far matters not in issue can and/or should be pursued, and how that evidence should be treated in the overall assessment of the witness. In my opinion, the cross-examiner should not be precluded, particularly where credit is in issue, from cross-examining on the issue of damages merely because the only matter being litigated is liability. That not only causes difficulties for the cross-examiner, but also for the Court. The Court may be prevented from making a fully informed assessment of the credibility of the witness if the cross-examination is truncated, or if certain contradictory material cannot be led because the cross-examination goes only to credit and not to an issue.

[16] A further difficulty, in these circumstances, is that if a Judge hearing the issue of liability makes any finding as to the credit of a witness, who is subsequently to give evidence in the event of the question of damages being litigated, that Judge will, in all probability, be disqualified from hearing the matter and, accordingly, the store of knowledge he or she has obtained from the initial hearing is lost, as is the impact of the evidence upon him or her: Australian National Industries Limited v Spedley Securities Limited (In Liquidation) (1992) 26 NSWLR 411. The finding may not necessarily have to be an adverse one to have this result. This is but one consequence, which leads to an inefficient use of the Court's and the parties' time and resources.

*****

[19] My next reason is that until there has been an assessment by the parties of the amount to which each says the plaintiff, if successful on the issue of liability, would be entitled, there can be no meaningful consideration by the parties of what the financial stake in issue is. In those circumstances, the parties are unable to give proper thought to an appropriate commercial settlement, consideration of which will be dependent not only on the amount involved, but also on the risk inherent in the issue of liability. In my opinion, it is highly desirable for parties involved in commercial litigation to focus on the whole case in determining how it can best be resolved."

14 The undesirability of splitting trials, where there may be credit issues involved, was also referred to by Giles CJ in Comm Div in Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 142 as follows:

"...It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties' dispute."

15 The first defendant did not elaborate upon where these credit issues may arise in specific terms. This is understandable. Senior counsel for the first defendant, however, gave an assurance that such issues would arise. To succeed on the question of liability the plaintiffs will have to establish what they would have done to avoid or reduce their losses. There will be an issue concerning this question. The first defendant also maintains that some of the plaintiffs' claims on quantum are exaggerated.

16 The first defendant finally submitted that despite the introduction of the Civil Procedure Act 2005, it remains the case that a separate determination of issues should be what Brereton J described as an "exceptional course" to be contrasted with the ordinary course of deciding a case in its totality: Street v Luna Park Sydney Pty Ltd [2007] NSWSC 697 at [5]

17 It will be apparent from the way the parties' respective cases were put on this issue prior to my judgment delivered on 1 October 2008 that the credit point had neither been adverted to nor sufficiently emphasised. It may not have been apparent to those advising the first defendant at the time. It has emerged now.

18 The plaintiffs oppose the application, not apparently upon the basis that the first defendant's point on the problems associated with the credit of witnesses, if their evidence is to be taken in two tranches, is not good, but upon the basis that they have the benefit of my original decision and have operated or proceeded for some time with that knowledge. According to the plaintiffs, any change now will cause disproportionate disruption and potential delay. This argument is supported by the evidence of Luke Torrisi in pars [7] – [14] of his affidavit sworn 11 December 2009.

19 The plaintiffs have also referred me to other cases. These include McKenzie v Downing [2008] NSWSC 69 in which Harrison AsJ ordered a separate hearing of issues and Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2006] NSWSC 1464 in which Brereton J made a similar order. In the latter case Brereton J made the following comments:

"[4] Resolution of the proposed separate questions will not determine the whole of the case, but they will determine whether the plaintiff is entitled to a significant ongoing source of revenue. If the plaintiff is right on that point, quite apart from the merits on the allegation of fraud, then it is being kept out of a source of revenue on account of what, at this stage, seems to be a single allegation of one particularised allegedly fraudulent application.

[5] In those circumstances, I think that the interests of justice are better served by proceeding to determine the separate questions. In particular, I do not see that any prejudice is occasioned to the defendants by that course, whereas some considerable prejudice might be occasioned to the plaintiff by deferring until a final hearing of the whole suit the proposed separate issue.

[6] While much has been said against the resolution of separate questions in Courts of high authority, nonetheless, since the (NSW) Civil Procedure Act 2005, it is my view that the Court should take a more interventionist role in identifying and separating important issues which can resolve significant parts of the litigation expeditiously."

20 The first of these several proceedings was commenced by a statement of claim filed originally in the District Court on 21 May 2002 on behalf of one of the plaintiffs. The proceedings were transferred to this Court on 21 June 2005 and between August 2005 and December 2005 the balance of the proceedings were filed. They all concern the events caused by and surrounding a large bush fire that destroyed property in the vicinity of the Warragamba Dam west of Sydney on 24 and 25 December 2001. These events have been the subject of a Coronial Inquiry in the meantime.

21 There is no issue that the respective cases of all of the parties will be complicated and time consuming. They give rise to many difficult and significant issues including but not limited to the fact, timing and adequacy of warnings and communications, the adequacy, appropriateness and levels of deployment of fire-fighters, plant and equipment, the existence and appropriateness of fire fighting plans and strategies, and the implementation of them, as well as issues of causation, preventability and statutory defences. Estimates of the need for more than 100 days of this Court's hearing time have been proffered. Mediations have proved to be of only very limited success and would not appear to have any remaining chance of further reducing either the scope of the issues or the number of cases to be heard.

22 This Court has the power to revisit and to set aside or vary its orders in an appropriate case, either pursuant to specific rules of Court or in the exercise of its inherent jurisdiction. The Court has power to order that issues of liability and quantum be rejoined and that all issues in the proceedings be tried at the same time: see, for example, Hoban v New South Wales Land & Housing Corporation [2008] NSWSC 1121. At the time that I originally ordered that there be a separate determination of the questions of liability and quantum I had not appreciated, and the first defendant had not emphasised, that there would be such an extensive cross-over between those giving evidence touching both the issues of liability and damages. The procedural disadvantages that are likely to be occasioned to the parties by revoking my order, including some further delays, must on the one hand be compared to the potential forensic disadvantages to the first defendant, as well as the potential for conflicting determinations upon the credit of witnesses, if that order is not made, on the other hand. The former can be corrected, or at least ameliorated by an appropriate costs order, but the latter cannot. I reiterate in the (quite proper) absence of any challenge to the assurances given by senior counsel for the first defendant, that significant issues of credit touching both areas will arise, and accepting that there is the potential for creating problems of the type identified in some of the cases if the issues remain separated, I consider that the order I made on 1 October 2008 should be set aside.

23 The first defendant also sought an order that it complete service of its evidence by 31 March 2010. That order was opposed by the plaintiffs upon the basis that the first defendant had sought extensions of time for doing so in the past and that any further concessions were unwarranted.

24 The first defendant's witnesses are clearly faced with a considerable task. The disruption and uncertainty created by the unresolved challenge to my 1 October 2008 orders will undoubtedly have contributed to problems for all parties in assembling their cases and in appreciating which areas of the evidence they could postpone completing and which areas they could not. Whereas the proposed date may have seemed somewhat distant when viewed from December 2009, when the application was argued, it is now relatively close. I have assumed that the first defendant will have been working towards the completion of its evidence by that date in anticipation of my determination of this application, so that some more certain indication of the state of readiness of the proceedings for hearing will be available very soon. I consider that the order sought by the first defendant that it completes service of its evidence by 31 March 2010 should also be made.

Orders

25 In all of these circumstances I consider that I should make the following orders:

1. I revoke order 9 made by me on 1 October 2008.

2. I order that the first defendant complete service of its evidence by 31 March 2010.

3. I order that the costs of this application will be costs in the cause.

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LAST UPDATED:
16 February 2010